2014 (1) TMI 1877 - AT - Income Tax

TDS u/s 195 - disallowance u/s 40(a)(i) in respect of the amounts paid by the assessee to M/s Abaqus In the case of without deduction of tax at source - CIT-A deleted addition treating the same as not taxable in India under Section 9(1)(vi) - assessing authority has treated the payments in the nature of royalty as against payments towards purchase consideration as argued by the assessee - HELD THAT - This issue has already been decided by the ITAT Chennai B-Bench in the case of Dassault Systems Simulia P. Ltd. (formerly known as Abacus Engineering Pvt. Ltd.) 2011 (9) TMI 207 - ITAT CHENNAI . After considering the issue and following the decision of Motorala Inc. v. DCIT 2005 (6) TMI 226 - ITAT DELHI-A the Tribunal has held that the payment is not in the nature of income arising or accruing in India within the meaning of Section 9(1)(vi) and therefore no taxability arises in India on such payments. The Tribunal held that it is a case of outright purchase and no income arises in India. In these circumstances we follow the said order of the Tribunal and hold that the disputed payments are not assessable to tax in India - Decided in favour of assessee.

Summary

Issues:
- Taxation of consideration received from Dassault Systems Simulia Private Ltd. towards sale of software products under Section 9(1)(vi) of the Income Tax Act, 1961.
- Disallowance under Section 40(a)(i) made in respect of payments to M/s Abaqus without deduction of tax at source.

Analysis:
The judgment by the Appellate Tribunal ITAT Chennai involved a bunch of five appeals, with four appeals filed by the assessee for the assessment years 2003-04, 2004-05, 2005-06, and 2006-07, and the fifth appeal filed by the Revenue for the assessment year 2009-10. The common issue raised in all these appeals was regarding the taxation of consideration received from Dassault Systems Simulia Private Ltd. towards the sale of software products, and the disallowance under Section 40(a)(i) in relation to payments made to M/s Abaqus without TDS deduction. The Tribunal noted that the assessing authority had treated the payments as royalty, but after considering relevant precedents, including the decision of ITAT Delhi Special Bench in the case of Motorala Inc. v. DCIT, it was held that the payments were not in the nature of income arising or accruing in India under Section 9(1)(vi). The Tribunal concluded that the payments were for outright purchase and not taxable in India, following the precedent set by ITAT Chennai B-Bench in the case of Dassault Systems Simulia P. Ltd. The appeals filed by the assessee for the assessment years 2003-04, 2004-05, 2005-06, and 2006-07 were allowed, while the Revenue's appeal for the assessment year 2009-10 was dismissed. The judgment was pronounced in an open court on January 9, 2014, in Chennai.